Post-retirement benefit plans comprise pension and retiree welfare plans. Representative examples of pension plans comprise plans subject to the federal Employee Retirement Income Security Act (“ERISA”), restoration pension plans, and supplemental executive retirement plans (“SERPs”). Representative examples of retiree welfare plans comprise medical and life (death benefit) plans. Such postretirement benefit plans are hereinafter collectively referred to as “benefit plans”. Benefit plans typically comprise a promise to pay future benefits in return for present day service. An actuarial valuation of a benefit plan provides a present day cost for those future liabilities. Actual actuarial valuations typically require much time and expense to create and provide only a snapshot of a benefit plan's financial status on the valuation date. A company relies on the actuarial valuation to determine its compliance with laws related to benefit plans and its funding requirements for the next budget year.
Conventionally, actuarial valuations are performed annually, and a company does not change its benefit plan budgets or forecasts until the next actuarial valuation is performed. However, if the equity markets decrease in value, then benefit plans can become under-funded. Nevertheless, companies are reluctant to order a new actuarial valuation between annual valuations because of the significant expense involved. Additionally, because the annual valuations require several weeks or more to research and prepare, a company cannot order an actuarial valuation to obtain current information for an urgent business. Accordingly, companies typically “make do” with their annual actuarial valuation even if that valuation is several months old.
Furthermore, without any current financial status information available, the client cannot evaluate hypothetical changes in capital market data or other benefit plan assumptions based on the current financial status of a benefit plan. Any such conventional hypothetical forecasts have been based on the annual actuarial valuation, which can be up to twelve months old. Those conventional hypothetical forecasts typically cannot provide an accurate financial valuation forecast because they are based on outdated underlying information.
Accordingly, a need exists in the actuarial arts for a system and method for efficiently updating benefit plan financial valuations during an intra-year time period between annual actuarial valuations. A further need exists in the art for calibrating benefit plan financial valuations to actual plan data achieved during the intra-year time period and for basing future financial valuation updates on the calibrated data. A need also exists for providing hypothetical analysis of theoretical benefit plan scenarios based on the updated and/or calibrated financial valuations.